(Bloomberg) -- JPMorgan Chase & Co. has agreed to partner with Cliffwater, FS Investments and Shenkman Capital Management Inc. in an effort to broaden its reach in the $1.7 trillion private credit market, according to people with knowledge of the matter.
As part of the arrangement, the bank will originate loans and invest in them alongside the direct lenders, who can only decline to participate in a handful of transactions over a pre-determined period of time, said the people, who asked not to be named discussing confidential information.
Representatives for JPMorgan, Cliffwater and Shenkman declined to comment. A representative for FS Investments confirmed their involvement in the partnership.
The rapid expansion of the private credit market has eaten into the profits of banks’ leveraged finance desks, prompting them to set up direct lending operations of their own or partner with existing managers to regain some ground.
Citigroup Inc. and Apollo Global Management Inc. agreed to work together on $25 billion worth of deals over the next five years, Bloomberg reported last week. Wells Fargo & Co. last year teamed up with Centerbridge Partners to launch a direct-lending fund, while Barclays Plc has teamed up with AGL Credit Management to originate private loans.
JPMorgan, one of the largest underwriters of bonds and loans for junk-rated companies, has been working to partner with private credit firms since at least late 2023, Bloomberg previously reported. It’s also set aside over $10 billion of its balance sheet cash to back its foray into the market.
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